Mati Greenspan, an analyst at eToro, believes the crypto markets are overreacting to the Tether news, saying in an email: “Several clients have already approached me asking what the ramifications could be, but honestly, I really don’t see the big deal.”

“Firstly, the US Government has been creating USD out of thin air for the better part of the last decade without having any major negative impact on the Dollar’s price or it’s ability to be used as a medium of exchange.” “Secondly, even if market players do lose confidence in Tether and it goes to zero, what’s the worst-case scenario for Bitcoin and other cryptocurrencies? All it means is that alternative investors will prefer to rotate out of Tether and into other coins.”

“The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system,” Finance Minister Arun Jaitley said in his budget speech.

Elsewhere in the crypto markets, ethereum is down 0.5% to trade at $1,100, while Ripple’s XRP is around 9% lower.